by John Moakler | Apr 26, 2022 | Uncategorized
April 26, 2022
I also cover this in a YouTube video. Click here to watch!
ATTENTION DENTISTS!
Do you have a comprehensive financial and retirement plan – written down – that maps out when you can afford to retire and what your retirement paycheque will look like?
This is the third and final blog in a series of three on this important topic.
Here’s a quick recap of what we’ve covered so far:
In the first blog we talked about the structure of your dental practice and when you are ready to sell the practice; we highlighted some of the key differences between selling the shares of your corporation versus selling the assets of your corporation.
The second blog talked about putting necessary bumper guards in place, to protect you and your family in the event life throws you a curveball.
In today’s blog, we are going to talk about how to leverage your practice to build a tax-free “personal” retirement paycheque. In addition, I’m going to explain why it is important for you to have a second corporation.
If you remember back to the first blog, I brought up the issue of “passive assets” inside your corporation. I mentioned that if you wanted to sell the shares of your corporation down the road, then you would need to restructure – or “purify” – your corporation prior to sale, to ensure that the business qualifies for the $850K+ Lifetime Capital Gains Exemption.
In order to “purify” your Dental Practice Corporation, you will need to open up a second corporation as part of that process – it will simply be an “Investment Corporation.” I don’t want to get too far into the weeds, but this second corporation is considered “connected” in the eyes of Revenue Canada. Meaning: the Small Business Tax Rate on the first $500K of active income will now be shared between the two corporations… But, if you do this correctly, this will not become an issue.
Now that you have this second corporation opened, we can now “loan money” from the Dental Corp to the Investment Corp and you only have to charge what is called the “Prescribed Rate of Interest” – which is currently sitting at 1%. So, you could move 99 cents on the dollar from your active Dental Corp over to the Investment Corp, you’re looking at 99 cents on the dollar to go out and purchase rental real estate. Now because this rental real estate is inside the Investment Corp, this will make it easier down the road to sell the “shares” of your Dental Corp in order to qualify for the $850K of the Lifetime Capital Gains Exemption.
Let’s change gears
We want to build a pension plan for you that will lead to a Tax-Free Retirement Paycheque – using either your Dental Corp or your Investment Corp. If you are confident that you will be selling your Dental Corp down the road, then I would highly recommend that we implement this strategy through your Investment Corp.
The Pension Plan is called the Insured Retirement Program (or IRP); it has both an insurance component to it as well as a cash investment component.
Now some of you reading this blog may have heard of this strategy, but I guarantee you’ve probably never seen the IRP designed the way that I design it.
Most advisors design an IRP the wrong way. How? Because they design it such that you have to wait 10, 14, or even 20 years to get access to the cash sitting inside the Whole Life Policy. In short: they have designed it for when you die and not for while you are alive.
Now I’ll let you in on a little secret: the way they designed that policy will maximize the commissions for your advisor.
In my opinion, it has not been designed for your best interest, which is what’s most important.
Let me explain.
With Whole Life Insurance, you have a component of the premium that is strictly paying for the death benefit and you have a component of the premium that can go into the Cash Investment Account. The design of the IRP mentioned earlier in this blog – where you have to wait 14 or more years to get access to the cash – means that most of your premium is going to pay the death benefit.
But what if I told you that with the way that I design the IRP, you can write a cheque for the premium on Monday and we could give you access to up to 90% of the cash value inside the policy by Tuesday.
Full Disclosure – I make a lot less commission designing it this way, but typically after four or five years, you could have access to up to 100% of the money you have put into the IRP.
So what does this all mean for you and why would I design it this way?
I have three key reasons –
1. Because I truly believe this design is in the best interest of you and your family.
2. If you think back to what happened when Covid-19 first hit, cash flow might have been an issue for you. What if I told you that based upon my design of the IRP, you could have taken a premium holiday in 2020, thereby conserving your cash flow?
3. I design the IRP this way because after four or five years, if you change your mind, you could still get up to all of your money back.
Think about it this way: if you wrote a cheque for $100K on a Monday and I told you that you could have access to $90K of that premium on by the next day… what could you do with that money?
Think about it – the $100K premium is paying for much-needed life insurance coverage for you and your family, but now you have access to $90K of that money which could be used to purchase rental real estate or to reinvest back into your business.
Now there is a fourth key reason of why I design my IRPs this way that I haven’t shared yet…
Picture this, you are making these premium payments either out of your Dental Corp or out of your Investment Corp, it doesn’t matter… We are giving you immediate access of up to 90% of the cash value inside the policy. When you decide to retire down the road, we can take that policy to a lending institution and they can turn on a 100% tax-free retirement income.
I’d say that’s kind of like having your cake and eating it too!
I’ve covered a lot about financial planning for dentists in these last three videos… now just imagine what we can do for you in person.
If you are interested in developing a comprehensive written Financial & Retirement Plan, contact me at the coordinates below to apply to become my client. Thanks for reading and always remember: when we design financial plans for our clients, we make sure that your money outlives you in retirement.
For the best life insurance advice and information, subscribe to my YouTube Channel and hit the notifications bell to be notified when we post new videos. The channel allows me to share my passion for personal financial planning and I produce content that I would want to watch – and because of that, I promise to give you 110% effort in every video that I make.
By John Moakler, BMath, CFP, CLU
President and Senior Executive Financial Planner
Moakler Wealth Management
info@moaklerwealthmanagement.com
1 416 840 8544
by John Moakler | Apr 19, 2022 | Uncategorized
April 19, 2022
I also cover this in a YouTube video. Click here to watch!
Welcome back, dentists! This blog is part two in a series of three on this very important topic: having a comprehensive, written financial and retirement plan. My focus is on developing a financial plan for a dentist, because it is very different than developing a financial plan for a doctor.
In last week’s blog – Financial Planning for Dentists: PART ONE – we talked about the structure of the dental practice and when you are ready to sell the practice. We also walked through some of the key differences between selling the shares of your corporation versus selling the assets of your corporation.
In today’s blog, we are going to talk about putting bumper guards around you and your family in the event that life throws you a curveball.
Here’s what I know for a fact –
Your most important asset is your ability each and every day to get up and go to work to earn a living. And so, if something had happened to you last night and you couldn’t work today, the question I always ask is…
What is going to be your paycheque?
If the worst happened to you, the best way to address this issue is something called Disability Insurance – it will step in to become your paycheque for the rest of your working life.
Disability insurance premiums should always be paid for with personal tax dollars. Because if you are ever diagnosed with a disability, all of the income you would receive would be “tax-free income.” This is very important!
When designing a disability policy, you have to look at certain features that are “must-haves” in order to fully protect yourself.
The first feature is called “Own Occupation”. If you don’t have this feature, then after two years into the disability benefits, the insurance company can force you to do any other job you are capable of doing. BUT, if you do have the “own occupation” feature in your plan, then the insurance company can’t force you to do any other job than the job you were doing the day before you became disabled.
In addition to “own occupation,” you should also have a feature called Cost of Living Allowance (or COLA) because if you ever went on claim, you want to make sure that your monthly benefit is keeping up with inflation.
The third feature you should look into is Future Income Option (or FIO). As long as your income has gone up, this feature allows you to purchase additional monthly benefits, but you do not need to undergo any future medical underwriting.
The fourth and final feature we should look at is called the Return of Premium (or ROP). This works like clockwork – every seven or eight years, if you haven’t filed a disability claim, then you get 50% of the premiums back that you paid and you receive this money “tax-free”. So, either you get a disability and you receive the monthly benefit, or you get 50% of your money back.
Now that we have taken care of you and your family should you get a disability, we now need to focus our attention on your dental practice.
Most, if not ALL dentists who own a practice – which includes frontline staff as well as hygienists – will need something called “Overhead Insurance”. This type of coverage kicks in to protect your practice should you be diagnosed with a disability. It will pay for your rent, wages of your staff, etc. For more details on this, follow the coordinates at the very bottom of this article to get in touch with us.
The next bumper guard to look at in protecting you and your family is “Critical Illness” insurance. I have a number of videos on my YouTube channel that go into great depth on this subject, so I won’t repeat myself.
Here’s what I want you to know and remember
We design “guaranteed” Critical Illness policies for our clients – either you are going to get a covered critical illness and the policy will pay out, or once the surrender clause kicks in, you can ask for 100% of your money back. You can’t ask for more guarantee than that!
In next week’s blog – Financial Planning for Dentists: PART THREE – I will get into how to leverage your practice to build a tax-free “personal” retirement paycheque, purchase rental real estate, and offer a brief overview on why it is important for you to have a second corporation.
If you are interested in developing a comprehensive written Financial & Retirement Plan, contact me at the coordinates below to apply to become my client. Thanks for reading and always remember: when we design financial plans for our clients, we make sure that your money outlives you in retirement.
For the best life insurance advice and information, subscribe to my YouTube Channel and hit the notifications bell to be notified when we post new videos. The channel allows me to share my passion for personal financial planning and I produce content that I would want to watch – and because of that, I promise to give you 110% effort in every video that I make.
By John Moakler, BMath, CFP, CLU
President and Senior Executive Financial Planner
Moakler Wealth Management
info@moaklerwealthmanagement.com
1 416 840 8544
by John Moakler | Apr 12, 2022 | Uncategorized
April 12, 2022
I also cover this in a YouTube video. Click here to watch!
I have good news.
I’m starting to see a number of dentists – from all across Canada – reaching out to connect with me via LinkedIn and YouTube. So, I thought I would dedicate my next three blogs to – as the title suggests – Financial Planning for Dentists. Because developing a financial plan for a dentist is very different from developing a financial plan for a doctor.
So here’s the thing – there is a key difference between dentists and doctors
Almost 100% of dentists can sell their practice, but when it comes to doctors, the numbers flip around and 99% of doctors do not get a chance to sell their practice. Usually, family doctors wind down their practice and most often the patients need to find their own replacement doctor.
So for dentists there needs to be extra care involved in structuring – and then implementing – the financial and retirement plan.
Now this is critical
Ideally a dentist will want to sell the “shares” of their corporation to the incoming buyer so that they can take advantage of the $850K+ Lifetime Capital Gains Exemption. Meaning that the first $850K of the purchase price is 100% tax-free money to the Dentist.
However, when somebody purchases the shares of a Dental Corporation, they are also purchasing any potential hidden issues that might not be apparent at the time of the sale. So, sometimes, incoming buyers of a dental practice would prefer to pay for the “assets” of the Dental Corp. If this happens there is still a way to structure the sale so that some of the money is received in a more “tax-preferred” way by using an accounting term called “Goodwill”.
Now, personal goodwill can be present when the dentist’s reputation, expertise, skill, knowledge, and relationships with customers are critical to the business’s success and value.
Think about it this way
Personal goodwill may be deemed as an asset of the corporation where the shareholder – in this case the dentist – has transferred the goodwill to the corporation through employment, or other agreements with the corporation.
Here is another key point
A sale of corporate assets and personal goodwill should be planned carefully and executed to establish that personal goodwill exists – that it is being sold in a separate transaction from the sale of the assets of the corporation.
Now, as a result, you might also be able to negotiate a higher sale price so the after-tax proceeds of an asset sale are similar to a share sale.
Because a dentist is most likely to sell their dental practice, you also have to be very careful in the period of time leading up to the sale of the practice.
If you have investment assets inside the Dental Corporation – and they are not being used to run the practice – then they are considered “Passive Assets”.
If at the time of the sale there are passive assets inside the corporation – such that less than 90% of assets are being used to run the business as a dental practice – then you may have to restructure or “purify” your corporation prior to sale. This is to ensure that the business qualifies for the Lifetime Capital Gains Exemption.
Now, some provinces across Canada allow dentists to actively “purify” their assets on a regular basis, while other provinces are not supportive of this accounting procedure. You will need to work with a Licensed Financial Planner and a Certified Accountant to determine how you will plan for the sale of your dental practice.
Here is something else to know and remember
If you do sell the assets of your corporation instead of the shares, then you do get to keep the corporation; if you decide to give up your license to practice dentistry, then the corporation will no longer be a Dental Professional Corporation, but it will turn into an Investment Corporation. The proceeds of the sale would then go into the Corporation and you could continue to pay yourself dividends out of the Investment Corporation in retirement.
In summary
We have covered the structure of the dental practice and the difference between selling the shares of your corporation versus selling the assets of your corporation. In my next blog, I will get into the importance of protecting you and your family if life throws you a curveball. We will also get into the importance of having a second Corporation.
Now, in some provinces your Dental Association frowns upon you having a Holding Company… but I will overview why it is important for you to have this second Corporation and how we get around any issue with regards to having a Holding Company.
If you are interested in developing a comprehensive written Financial & Retirement Plan, contact me at the coordinates below to apply to become my client. Thanks for reading and always remember: when we design financial plans for our clients, we make sure that your money outlives you in retirement.
For the best life insurance advice and information, subscribe to my YouTube Channel and hit the notifications bell to be notified when we post new videos. The channel allows me to share my passion for personal financial planning and I produce content that I would want to watch – and because of that, I promise to give you 110% effort in every video that I make.
By John Moakler, BMath, CFP, CLU
President and Senior Executive Financial Planner
Moakler Wealth Management
info@moaklerwealthmanagement.com
1 416 840 8544
by John Moakler | Apr 7, 2022 | Uncategorized
April 7, 2022
I also cover this in a YouTube video. Click here to watch!
I’m going to let you in on a little secret about how you can get Critical Illness Insurance coverage completely free.
It starts with my asking you this simple question: if you could purchase an insurance contract and get a guarantee in writing that if you never ended up using the coverage while you are alive – and you could get 100% of your money back, tax-free – would you be interested?
Now who wouldn’t be!
Only 5% of Canadians have Critical Illness coverage, while 85% of Canadians worry about getting a critical illness. 58% of all Canadians have admitted that they would be in financial trouble if they were diagnosed with a critical illness.
So what if I told you there is a better way to get Critical Illness coverage and it doubles as a great strategy for getting money out of your corporation on a tax-free basis.
The strategy that I am referring to is called a “Shared Ownership” Critical Illness policy. It is structured in such a way that your corporation pays a huge part of the premium for the actual Critical Illness coverage and you are paying for both the Return of Premium on Death and the Return of Premium on Surrender.
Here’s how it works
The corporation pays around 60% of the premiums with corporate dollars and you are paying the remaining 40% of the premiums with personal dollars.
If you contracted one of the 25+ covered critical illnesses listed in your policy – and live for at least 30 days – then the policy will payout the benefit. If, however, you have qualified to surrender the policy, you can ask for 100% of your money back. You would get both the corporately paid portion of the premiums, as well as the personally paid portion of the premiums 100% tax-free. This would allow you to pay much of the costs of the premium corporately at a much lower corporate tax rate, but if you remain healthy for a period of time – generally until you stop working or the coverage expires – you can have 100% of all premiums paid repaid to you personally.
So overall, this is a great strategy for getting money out of the corporation tax-free, while simultaneously protecting you and your family in the case you are diagnosed with a critical illness.
Let’s look at a case study
Let’s say you are 42-years-old and you are a successfully incorporated business owner. We’ll assume that you need to get $350,000 of Critical Illness coverage. So, we apply for $350,000 of Critical Illness coverage with a Return of Premium upon Death (ROPD) and a Return of Premium upon Surrender (ROPS) after 15+ years. The total annual premium is $6,100.00
In this example, the corporation would pay for the specific Critical Illness coverage – or $3,700 of the premium per year – and you would pay for the Return of Premium features – or $2,400 of the premium per year.
After 15+ years, you now have choices. You can continue to pay the premiums both corporately and personally, or you can execute the 15+ year surrender clause and ask for 100% of your money back.
In this scenario, you would be 57-years-old at this point. You can continue to pay the premiums, or if you asked for 100% of your money back, you would get 100% of what you paid personally as well as what the corporation paid. All that dough would be coming back to you tax-free.
Both you and the corporation paid $6,100.00 combined, per year, for 15 years… so you can now ask the insurance company to cancel the coverage and send you a personal tax-free cheque in the amount of $91,500.00.
As you can see, this is a great way to get the coverage that you need now, and when you no longer want or need the coverage, you can simply ask for your money back, tax-free.
My team and I design “guaranteed” Critical Illness policies for our clients – either you are going to get a covered critical illness and the policy will pay out, or once the surrender clause kicks in, you can ask for 100% of your money back. You can’t ask for more guarantee than that.
Who benefits from a Shared Ownership Critical Illness Policy?
The company is protected against financial loss and is provided liquidity in the event a shareholder is diagnosed with a critical illness and needs to take time off to recover.
A shareholder will benefit if they remain healthy, do not develop a critical illness, and do not make a claim; they just wait for the surrender clause to kick in and they can collapse the policy, at which point they can ask for 100% of the premiums paid back.
If you’d like to learn more about how you can incorporate a Shared Ownership Critical Illness policy into your own personalized financial & retirement plan, contact me at the coordinates below to apply to become my client. Thanks for reading and always remember: when we design financial plans for our clients, we make sure that your money outlives you in retirement.
For the best life insurance advice and information, subscribe to my YouTube Channel and hit the notifications bell to be notified when we post new videos. The channel allows me to share my passion for personal financial planning and I produce content that I would want to watch – and because of that, I promise to give you 110% effort in every video that I make.
By John Moakler, BMath, CFP, CLU
President and Senior Executive Financial Planner
Moakler Wealth Management
info@moaklerwealthmanagement.com
1 416 840 8544
by John Moakler | Apr 4, 2022 | Uncategorized
April 4, 2022
I also cover this in a YouTube video. Click here to watch!
Let me ask you a question
If something happened to you last night and you passed away unexpectedly – would your family be fully protected?
Let me ask you another question
If you were at home cleaning out the gutters or washing the windows, and you fell off the ladder and hurt yourself so badly that you could never go back to work – what would be the value of your monthly paycheque for the rest of your life?
Let me ask you one more question
If you were not feeling well, you went to see your family doctor, they ran some tests and then told you that you had stage two or stage three cancer – what is your game plan? And, are you protected?
All of these questions lead to something called a “Needs Analysis.” In this short article, I’ll be giving you all the necessary facts you’ll need to consider when making an informed decision for you and your family about why you need one.
A Needs Analysis is something my team runs so that if life happens and you get hit by a curveball, you can rest assured that you and your family are protected.
In the case of death, the Needs Analysis calculation needs to take into consideration all of the family debt, your children’s future post-secondary education costs, the financial contribution that you make to the monthly budget, and of course, your funeral costs. Depending upon how old you are and the ages of your children, it could mean that you need to have $2M to $4M of life insurance coverage in order to make sure that if you passed away unexpectedly, your family can continue to live their current lifestyle. Now I know your spouse will wear black for a number of weeks, but they also need to get on with their lives, so you want to make sure there are no financial worries.
In the case of injury, where you cannot return to work, the Needs Analysis calculation needs to take into consideration the financial contribution that you make to the monthly budget. So, if your monthly budget is $10K or $12K and your “net pay” makes up 50% of this number, then you need to make sure you have at least $5K or $6K per month in Disability Insurance coverage. If you don’t, then pressure will start to rise and you will need to find another job that you can do in order to survive.
In the case of critical illness – like cancer, heart attack, or stroke – the Needs Analysis calculation needs to take into consideration that we are starting to survive these critical illnesses, but we are off work for a period of time while we recover. So, if you are making $100K or $200K per year after taxes, then for the average male you will be off work for 18 months and will need at least $200K to $300K in Critical Illness Insurance coverage. For the average female, they are typically off work for 18-24 months, and so they will need at least $300K to $400K in Critical Illness Insurance coverage.
A Needs Analysis calculation takes a number of factors into consideration. As you can see, depending on what happens in your life, you need to make sure that you are working with somebody who actually knows how to calculate a Needs Analysis… otherwise, you might end up with a gap in coverage and have to tap into reserve funds in order to survive.
Covid-19 has taught us a lot when it comes to the recognition of front-line workers and our own mortality; make sure you’re protected, and that you get a proper Needs Analysis done for you and your family.
If you’d like to learn more about getting a Needs Analysis for you and your family, contact me at the coordinates below to apply to become my client. Thanks for reading and always remember: when we design financial plans for our clients, we make sure that your money outlives you in retirement.
For the best life insurance advice and information, subscribe to my YouTube Channel and hit the notifications bell to be notified when we post new videos. The channel allows me to share my passion for personal financial planning and I produce content that I would want to watch – and because of that, I promise to give you 110% effort in every video that I make.
By John Moakler, BMath, CFP, CLU
President and Senior Executive Financial Planner
Moakler Wealth Management
info@moaklerwealthmanagement.com
1 416 840 8544
